What Can A 19th Century Mill Teach Us About Management Today?

Michael Dean
•
10-08-2015

Despite the achievements of the age, we should never kid ourselves that working conditions in the industrialising nations of the 18th and 19th Century were anything but dismal for the vast majority of people.

This time was, however, not all grinding poverty and industrial strife. There are many shining examples of pioneering companies that elevated their organisations above the basic struggle between workers, manager and owners to become institutions of community, learning and shared prosperity.

Many innovations and policies of these businesses are what make our work lives the way they are today.

Started from the bottom

We’ll start at the New Lanark cotton-spinning mill in the lowlands of Scotland at the beginning of the 19th Century – a time when Chicago had less than 200 residents and Napoleon’s army was rampaging around continental Europe.

Robert Owen – mostly known today as the father of the cooperative movement and for his failed utopian community in New Harmony, Indiana – was a rising entrepreneur of the time.

In 1789 a 19-year-old Owen had left his job as a draper’s assistant and taken a loan of £100 (the equivalent of approximately £5650 today) to co-found a cloth manufacturing business with an engineer friend in Manchester.

A few years later, the experience of running his own business got him a management job at a far larger spinning factory – while his greater interests lead him into a friendship with famous utilitarian philosopher Jeremy Bentham.

On a business trip to Glasgow, Owen met and fell in love with Caroline Dale. Her father, David Dale, owned the New Lanark Mill and when the two married in 1799, Owen was already in talks to buy the business. In 1800, with a group of investment partners, the mill was purchased for £60,000 (£1,950,000 in today’s money) payable over 20 years.

Owen’s skill as an entrepreneur and manager were now to collide with the progressive moral views he’d developed – leading him to run New Lanark in a way that would frustrate his partners but garner such acclaim as to draw leading British politicians and even Tsar Nicholas I of Russia to visit the mill over the coming years.

The struggle for trust

Quite sensibly, the workers at New Lanark were highly suspicious of the mill’s new manager. “Squeezing as much gain out of them as possible” was the only management style workers could expect at the time, explained Owen in his autobiography. “The workpeople were systematically opposed to every change which I proposed, and did whatever they could to frustrate my object.”

We should keep in mind that this was not a period of prosperity for workers. Increased competition in this developing industry had pushed down prices and thus wages. For example, by correcting for inflation to today’s money, we see that in 1795 handloom weavers in Bolton would have earned the equivalent of £70 a week, but by 1815 their wages had dropped to £30 (and they’d continue down to less than £16 by 1829-34).

What Owen needed to do – as every new CEO or manager must do today – was to win the trust of employees. He believed that his workers would only be convinced by quietly introducing new policies that they would see for themselves as a fairer deal.

To Owen, an obvious place to start was with the introduction of a minimum working age of ten-years-old. This is, of course, shocking by today’s standards, but at the time children as young as six were working at New Lanark (and in factories around the country). He instead built a school for the village’s children where all those underage would be sent.

He then introduced the unheard of right for workers to appeal their supervisors’ judgments. Workers ‘talking back’ to managers would have resulted in an instant dismissal or beating (another practice he forbade) in almost any other workplace at the time.

A real watershed moment came in 1806, six years into Owen’s tenure. With Britain and France at war, the United States hoped to continue trading with both sides. However, when many ships were seized by the warring factions, Thomas Jefferson sponsored a trade embargo that halted all exports from the US. Given that British mills depended on American cotton, this caused a major crisis, with most factory owners simply shutting up shop. Owen however, ran his mill differently.

At the equivalent cost in £237,700 today (and against the wishes of his business partners), Owen continued to employ his workers – giving them the task of maintaining the mill’s machinery – until after four months they were back in business. Owen explained: “This proceeding won the confidence and the hearts of the whole population and henceforward I had no obstructions from them in my progress of reforms.”

Commercial success with a higher purpose

The reforms continued with Owen cutting the work day from 14 to 10.5 hours as the success of his business grew. In the same year, Owen bought out his partners (thanks in part to new investment from Benthem and Quaker William Allen) for £84,000 in cash (£2,900,000 in today’s money).

In relative terms, factories were far less expensive then – but to add some perspective to Owen’s financial success, this was at a time when less than 15% of British families had an income of more than £50 (£1720 today) per year, and less than 4% earned more than £200 (£6850) a year.

The following year it was a ten-hour day that he would lobby the government on as his notoriety grew (this became UK law for women and children in 1847). He would later propose an eight-hour day with the slogan: “Eight hours labour, Eight hours recreation, Eight hours rest.” In 1926, Ford were one of the first American companies to reach this goal when adopting the 40-hour week.

Through his consistent reforms Owen had transformed New Lanark. He’d created a model of mutual trust where in return for loyalty and high quality work, employees lived more balanced lives with security from the extremely volatile economic climate of the time.

The timeless ingredient in great workplaces

In his classic study A Great Place To Work, Robert Levering, parallels New Lanark to the modern workplace – praising Owen for overcoming the initial hostility he faced, while pointing out occasional errors of judgement later in his career:

“Trust does not exist naturally in the workplace. Where it does take root and grow, it is a highly perishable commodity requiring constant attention and care,” explains Levering.

Through Owen’s patience and consistency, the way he delivered what he promised, and his willingness to go beyond a conventional relationship with his employees, he built trust. These are all principles that we can learn from and operate by today.

To Levering openness is also essential for fostering trust: “When there’s a free flow of information, employees have plenty of opportunity to learn for themselves what the management is up to and they can raise questions to those in authority.”

Owen fell foul of this principle when he set up an employee sick-fund, part paid for by employees (which may have been a very fine idea). His growing fame and distractions had caused him to spend prolonged periods away from New Lanark – making him inaccessible to employees.

In this case, the perception of his efforts shifted and his reforms suddenly seemed thrust-upon and paternalist. The lack of transparency brought back the suspicions that Owen had managed to surpass. Now employees felt the relationship was imbalanced which reduced their trust in Owen.

Although clearly not an ideal workplace by modern standards, the fact New Lanark operated as it did – when its contemporaries were most famously described as dark and satanic by poet William Blake (not something you’d hope for on your Glassdoor page today) – is testament to Owen’s brilliance. The high level of trust he continuously strived for is still an essential part of every great company today.

Bibliography:

Hobsbawm, Eric – The Age of Revolution (1962)Hobsbawm, Eric – The Age of Capital (1975)Levering, Robert – A Great Place To Work (1988)Owen, Robert – The Life of Robert Owen (1920)Owen, Robert – A New View of Society and Other Writings (1995)Pollard, Sidney – Peaceful Conquest: Industrialisation of Europe (1981)